Market Is Long Of Mania In Schizophrenic Terms

NASDAQ managed its largest gain in four months as Apple came back into vogue and saved the day. The equity indices were alone in their magnificent exuberance after the European close as Gold, Treasuries, and the USD all tracked sideways in a very narrow range. As we have been warning, the mania is back in equity (and credit markets but less so) as April has now seen six of the last nine days swinging between 2 sigma gains and 2 sigma losses (for the NASDAQ). Volume was average today in ES (the S&P 500 e-mini futures) and NYSE (stocks) but high in Apple's equity and options markets as the schizophrenic behavior pushed the stock from under $572 at the open to almost $610 by the close (though notably stuck between Friday's close $605.19 and its closing VWAP at $610.74). The last day to fund your IRA combined with tomorrow's VIX futures/options expiration likely helped some of this momentum (as we note VIX is about 1 vol higher than it was when the S&P closed at these levels on Friday). Just as in Europe, credit markets were simply not as enamored with the Spanish auction or Apple's awesomeness as equities and drifted sideways to weaker all afternoon (with some late-day weakness in HYG as it starts to fall back towards its NAV). Financials and Materials lost some ground into the close and ES gave all its post-Europe-close gains back as volume and trade size picked up significantly at last Thursday's swing highs (near pre-NFP levels again). The Treasury complex saw all its 'losses' in the early going and went sideways in an extremely narrow range for much of the US day session - ending the day slightly higher in yield (0.5-1.5bps) on the week. Commodities surged early on as the USD slipped but drifted back from mid-morning on (except WTI which broke above $105 (ended above $104) for the first time in 2 weeks. Gold and Silver nose-dived right after the US open only to recover it all by the European close. EUR strength (and USD weakness) occurred early this morning on the Spanish auction and aside from a rip in CAD the rest of the day was relatively tight ranges with a very small drift higher in DXY. All-in-all, it seemed like an oversold snap that saw opportunistic sellers coming in at the end as average trade size surged and ES closed back above its 50DMA again - echoing last week's mania and worryingly raising realized vol for all those hopes and dreamers.

NASDAQ (and in fact the rest of the equity index complex) is exhibiting very significant swings intraday. Based on 3 month vol, we have experienced six 2 sigma swings in the last nine days...the last time such an event happened was the whipsaw mania of last summer that further served to destroy retail faith in markets...

Across asset classes the distinct phases of today's market are very evident. Gold's nose-dive after the US open (and recovery by the European close) are clear and the sideways drift after Europe with Equities outperforming only to revert it all back at the close...

FX markets were dominated by the AUD and CAD rallies (most notably the latter - chart below shows USD strength is higher relative to each currency) but soon after the European close these started to leak back lower - following JPY's general trend all day (as carry trades went from bid to stable)...

VIX (green) is notably higher than the last time the S&P closed at these levels (orange). Also noteworthy is the fact that VIX closed near its opening levels of the day - given the jump in price (suggesting macro vol overlays were evident)...

Equities remain rich relative to credit and even HYG has started to pull lower after reconverging from April rotation...

HYG is notably rich relative to its NAV...

Gold and Silver stumbled hard right after the US open but recovered - though we note Gold remains lower on the week while Silver is higher (more in line with USD's weakness)...

And on Apple, we thought it interesting that it was unable to break above Friday's closing VWAP adn the blue shaded bars show heavier block trade activity occuring into the Friday closing price level and again as pushed close to Friday's VWAP (as algos jiggled it higher for some better exit levels)...

Finally, based on broad risk assets (as proxied by our CONTEXT model) we have seen this pattern before. Last week we saw equities surge exuberantly higher leaving risk in general in the dust (as we noted earlier on the back of well-recoved Italy bill auction that time). While markets do not always repeat, they certainly rhyme from time to time...